OPINION OF THE COURT BY JUSTICE CUNNINGHAM.
Appellant, Linda Davis ("Linda") married Matthew Davis ("Matthew"), in 1981. On May 23, 2003, Linda and Matthew executed a property settlement agreement (the "Agreement"). Therein, the parties expressed their desire that the Agreement "be incorporated into and made a part of any final decree which may be entered herein...." In addition to many other provisions dividing property, the Agreement specifically provided that "[Matthew] agrees to maintain his policy of life insurance with Monumental Life Insurance Company in the total amount of $100,000.00 and will keep [Linda] as the beneficiary."
On May 27, 2003, the Wayne Circuit Court entered a final decree dissolving their marriage. Although the decree of dissolution acknowledged that the parties had settled their property claims, it failed to incorporate the Agreement. This omission went unnoticed until after Matthew died in July 2011. Six weeks prior to his death, Matthew changed the beneficiary on his Monumental Policy, which was in force since 1997, to his then-wife of two years, the Appellee, Karen Davis ("Karen").
When Linda learned of Matthew's death, she filed a proof of claim against his estate premised upon a breach of the Agreement. Karen, as executrix of Matthew's estate, denied Linda's claim, and subsequently filed this action in Greenup Circuit Court against Monumental Life Insurance Company for the policy proceeds. Linda intervened in this action as a third party plaintiff to file a competing claim to those life insurance proceeds and to add Matthew's estate as a third party defendant.
The Greenup Circuit Court concluded that absent compliance with KRS 403.180, a separation agreement is rendered unenforceable. The Court of Appeals agreed
Appellees raise several procedural matters that must be addressed before reaching the merits of this case. Appellees maintain that Linda's notice of appeal was deficient and that the appeal should either be dismissed or limited to certain issues. Appellees raised these same or similar claims before the Court of Appeals in a motion to dismiss. Davis v. Davis, No. 2012-CA-002084-MR, 2014 WL 6687560, (Ky.App. November 26, 2014). The Court of Appeals denied Appellees' motion and determined that Linda's notice of appeal related forward to the order that made the litigation final. Id. citing Johnson v. Smith, 885 S.W.2d 944, 949 (Ky. 1994). See also CR 73.03. The court also concluded that Appellees failed to demonstrate any substantial harm or prejudice that resulted from the alleged errors. The court denied Appellees' motion and proceeded to the merits of the case. We agree with that decision and the reasons in support thereof. The same resolution is warranted here.
Appellees further contend that dismissal is required because Linda failed to timely file her brief in the Court of Appeals. However, Appellees have not indicated that they raised this alleged error in the Court of Appeals nor have they demonstrated any substantial harm or prejudice that resulted therefrom. Therefore, we will proceed to the merits.
KRS 403.180 governs the enforceability of written separation agreements. Property disposition provisions contained in such agreements are binding upon the court unless they are unconscionable. KRS 403.180(1) and (2). Section 4 of that statute states in pertinent part as follows:
It is undisputed that the requirements of Section 4 were not satisfied here. Therefore, the Agreement cannot be enforced as a judgment by the family court. The issue is whether Linda may nevertheless maintain a common law contract claim in order to enforce the Agreement; or, whether failure to incorporate or reference the Agreement in the decree of dissolution rendered the Agreement void.
Kentucky has a long history of enforcing contracts between spouses. In Smith v.
KRS 403.180 discusses whether a settlement agreement is enforceable as a judgment. However, KRS 403.180 does not automatically void settlement agreements which are improperly referenced or are not incorporated into the final decree of dissolution; nor does such a failure to comply with KRS 403.180 render a prior or contemporaneous property settlement agreement unenforceable. Cf. Annechino v. Joire, 946 A.2d 121, 122 (Pa. Super Ct.2008) (holding that the trial court had authority to enforce a marital property settlement agreement that had not been incorporated into the parties' final divorce decree). Although the Annechino court had the benefit of a Pennsylvania statute that expressly permitted enforcement of an unincorporated agreement, the absence of such a statutory provision permitting enforcement by the Kentucky Family Court does not imply a provision forbidding enforcement of the agreement by a Kentucky court of general jurisdiction. See Carter v. Carter, 382 S.W.2d 400, 401 (Ky.1964) ("divorce proceedings are equitable actions in this state [] and equity is broader than the statute"), superseded on other grounds in Neidlinger v. Neidlinger, 52 S.W.3d 513 (Ky.2001).
Furthermore, we acknowledge that KRS 403.180 was designed to protect parties "from their own irresponsible agreements[,]" primarily those agreements that are unconscionable. Shraberg v. Shraberg, 939 S.W.2d 330, 333 (Ky.1997). However, this does not foreclose a separate contract action to enforce a valid settlement agreement that was not incorporated or referenced in the final decree of dissolution. This logic is echoed in a leading Kentucky treatise:
Therefore, KRS 403.180 does not automatically foreclose post-decree dispositions or independent enforcement of property agreements not incorporated or referenced in the decree. Several other jurisdictions have also determined that separation agreements may be enforced as independent contract actions.
For example, in Dion v. Dion, a federal court applying Pennsylvania law observed that "a separation agreement for support which has not been merged into a divorce decree or support order creates a contractual
Having considered the relevant authority, we hold that a settlement agreement involving property division that was not incorporated or referenced in the final decree of dissolution may be enforced through an independent contract action. Our holding does not apply to agreements executed prior to or contemporaneously with an agreement that has been duly incorporated or referenced in a dissolution decree. In such cases, the agreement that is properly incorporated or referenced in the decree controls. Such language in effect becomes part of the final judgment.
Nor does our holding apply to settlement agreements that are made in anticipation of dissolution of marriage but, where the divorce is never consummated. As previously stated, the agreement at issue in this case included the expressed intent of the parties that the Agreement "be incorporated into and made a part of any final decree which may be entered herein...." Where it is evident that divorce is anticipated by the agreement, enforcement of the agreement becomes conditioned upon the divorce being completed in the action that is pending. 17A C.J.S. Contracts § 446. Many divorce actions are filed along with separation agreements and the parties either reconcile or dismiss the action without a final judgment of divorce. A party or parties may also die before the divorce is obtained. See Rhodes v. Pederson, 229 S.W.3d 62 (Ky. App.2007). Thus, a separation agreement in those instances would be unenforceable due to the failure to fulfill a condition upon which the agreement was premised — i.e. finalizing the divorce. See 17A C.J.S. Contracts § 451.
In the present case, however, the divorce was finalized by the dissolution decree. Accordingly, Linda may bring her contract claim and the respective defendants may raise all applicable defenses, including unconscionability. If the trial court determines that the Agreement is valid, enforceable, and that its terms have been breached, Linda may recover damages. To clarify, the distinction here is that the circuit court must consider all elements of a contract claim and all applicable defenses, whereas the family court would only, consider the conscionability of the agreement had it been duly incorporated into the decree.
Linda also contends that the Court of Appeals erred in affirming the trial court's denial of her claims for unjust enrichment and her request for the imposition for a constructive trust over the insurance policy proceeds. Having determined that Linda is entitled to pursue a claim under common law contract principles, it logically follows that she also be entitled to pursue all equitable claims and remedies available at common law. This includes a claim for unjust enrichment and the imposition
We also note that "despite cases to the contrary ... Kentucky courts have required the party seeking the imposition of a trust to establish a `confidential relationship' with the party upon whom the trust is to be imposed." Keeney v. Keeney, 223 S.W.3d 843, 849 (Ky.App.2007) (citing Panke v. Panke, 252 S.W.2d 909, 911 (Ky. 1952)). "Where it is deemed necessary, however, `[t]he existence of the relationship in any particular case is to be determined by the facts established.'" Id. at 849-50 (citing Henkin, Inc. v. Berea Bank & Trust Co., 566 S.W.2d 420, 423 (Ky.App. 1978)). With these considerations in mind, Linda may pursue her equitable claims upon remand.
Furthermore, the fact that Karen has not been named as a defendant in the Greenup County action is of no consequence. Karen is the plaintiff in that case and Linda is an intervening and third party plaintiff. Karen has filed an Answer in response to Linda's Intervening Complaint. Also, while not expressly alleging unjust enrichment or requesting the imposition of a constructive trust, Linda's Complaint alleges fraud and repeatedly requests that the transfer of any life insurance proceeds be set aside, along with any change of beneficiary. In any event, "[a] party's failure to assert the existence of unjust enrichment does not serve to make it nonexistent." Rose, 374 S.W.3d at 343. "As long as the trial court determines that the elements are present, it is not precluded from making the legal conclusion that unjust enrichment exists." Id.
For the forgoing reasons, we reverse the Court of Appeals and remand this case to the trial court for further proceedings consistent with this opinion.
All sitting. All concur.